Entrepreneurial Negotiations: Are We Getting Carried Away About Win-Win?

Just about any reading or training on negotiation will espouse that parties engaged in a negotiation will benefit if they take a collaborative, rather than competitive, approach. This perspective was maybe most popularized by Fisher and Ury’s (1981) “best seller” entitled Getting to Yes: Negotiating Agreement Without Giving In . Collaborative negotiation describes negotiation practices that strive to create value for both sides, and allows negotiators to find an agreement that is mutually beneficial. Approaching negotiations in this manner has been found to result in more optimal outcomes for both parties (Galinsky, Leonardelli, Okhuysen, & Mussweiler, 2005), and is recommended as a way to find resolutions to complex situations (Isen, 2001). Those recommendation notwithstanding, there are also potential risks to approaching negotiations collaboratively. Specifically, if one party is open and trusting, which is a necessity in collaborative negotiation and can lead to better joint outcomes (Pinkley, 1995), it leaves that party vulnerable to be taken advantage of if the opposing party does not reciprocate. Because entrepreneurs and small business owners engage in vast amounts and varieties of negotiations, we are compelled to determine how they tend to approach negotiation activities.

Common sense would suggest that entrepreneurs have a strong motivation to bargain relatively competitively. Many small businesses operate on a lesser scale and therefore must be more focused on achieving adequate profit margins. From this perspective, negotiating a good price on purchases along with premium sales values would help small businesses combat the problem of dealing in lesser quantities. Negotiations within the production process are not the only area where entrepreneurs should be extracting value. In fact entrepreneurs, probably more so than non-entrepreneurial managers, negotiate over a much broader area of activities. To name a few, entrepreneurs usually negotiate for venture capital and ownership, with personnel, over lease agreements, with co-founders, with utilities, etc. While these numerous activities provide evidence that entrepreneurs commonly negotiate, we know very little about how they approach these important endeavors. The purpose of this paper is to explore the perspectives entrepreneurs take when engaging in negotiations.

To accomplish this goal, we take a grounded approach to developing a knowledge base about entrepreneurs and small business owners regarding how they think about and conceptualize negotiations. We begin by providing a brief overview of some common entrepreneurial activities in which negotiation plays a role. Providing such a review is important for two central reasons. First, by pointing out how common negotiation is for small business owners, it will be clear why additional understanding is needed. And second, it will provide guidance needed for determining the questions to ask of entrepreneurs in the interview process. Next, we will describe the methods utilized for conducting the in-depth interviews necessary for uncovering initial information about how entrepreneurs approach negotiations. Results will then be discussed about what is uncovered while investigating our sample of entrepreneurs. Finally, we will discuss the interpretation of our findings and what it means for entrepreneurs and the future of this emerging field.